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Plan to Repeal Gov. LePage’s Tax Cuts is Bad for Maine’s Business Climate

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As Mainers reel from the 13 new taxes imposed this year by Uncle Sam, a new plan emerges in the Democratically-controlled legislature that would repeal Gov. LePage’s historic tax cuts–increasing the total number of tax hikes on Mainers to 14. Adding insult to injury, the repeal would be retroactive to January 1, 2013 so Mainers would have to pay back the 5 months worth of tax cuts they have enjoyed thus far.

This is a real shame because the tax cuts were starting to finally improve Maine’s business climate as perceived by the rest of the country. Consider these two improvements in two popular metrics:

The annual State Business Tax Climate Index published by the Tax Foundation ranks the friendliness of each state’s tax code to business (Disclosure: I am the original co-author of the study). This year Maine rose an astounding seven spots to #30 from #37. The study states: “Maine had the most sizable rank improvement this year, as a repeal of their alternative minimum tax and a change in treatment of net operating losses vaulted them from 37th to 30th best overall.”

The annual Rich States, Poor States (pdf) study published by the American Legislative Exchange Council ranks each state on economic performance (GDP and employment growth and net migration) and economic outlook (taxes, debt, right-to-work, etc.). This year Maine rose an astounding six spots to #41 from #47, just on the verge of breaking out of the bottom ten.

Not only would Maine’s ranking back-slide in these important cross-state comparisons, but it would also send a message to Maine’s businesses that there is no certainty in the business climate. Just think of all the businesses who have made plans to invest or hire new workers and who are now having to reassess, or at least put on hold, those decisions. In the short run, just the talk of repeal will throw cold water on Maine’s tepid economic recovery.

Maine already has one of the smallest private sectors in the country which is a major reason why Maine is lagging behind the rest of the country in job creation. Raising taxes now would only hinder the private sector’s ability to create badly needed jobs in Maine.